As complex COVID admissions slow, Tenet, HCA execs say high-acuity care investments will still pay off

Major for-profit health systems Tenet Healthcare and HCA Healthcare say their bets on higher-acuity service lines are looking sound even if COVID-19 patient volumes continue to taper off.

Industry reports had long pegged COVID-19 admissions as a key driver of metrics such as acuity and length-of-stay, which in turn increased hospitals’ per-admission revenue and expenses alike.

Tenet and HCA alike have been adapting their hospital service lines over the past couple of years to treat these high-revenue patients at greater cost efficiency, with a particular focus on surgical volumes that can deliver greater margins.

Speaking in separate presentations at this week’s Credit Suisse Healthcare Conference, executives from the two organizations said they’re still committed to their high acuity strategies.

“We believe that the net revenue intensity that we're putting into place—including … the goal of replacing a lot of the COVID net revenue intensity from a year ago with true, organic, high net revenue intensity work—has gone very well and will continue to go well,” Saum Sutaria, M.D., CEO of Tenet Healthcare, said Tuesday. “That's how we'll continue to deploy capital and prioritize physician relationships from our standpoint because we believe it will be margin accretive over time.”

Executives said they’ve seen early indications that the drop-off in COVID-19 volumes will have a limited impact on their overall net revenue per adjusted admission.

“We’re starting to see some of the surgical volume return, so that’s a factor in there,” HCA Chief Financial Officer Bill Rutherford said Tuesday. “It’s hard to get an exact bead on it, but we said early on that if we can maintain the acuity levels we saw mostly through 2021, I think that’s a net positive.”

Sutaria said that his company has actually seen improvements in its case-mix index despite recent quarters’ decline of “very high acuity, commercially-oriented” COVID-19 cases.

“We’re really pleased by it,” he said, “because it suggests that our ability to maintain net revenue per case with a book of business that will be sustainable on a long-term basis is a transition that we’re making successfully.”

Tenet is also targeting a similar shift toward higher-acuity procedures within its ambulatory surgery business, United Surgical Partners International. That segment missed growth targets in the third quarter due in part to pandemic interruption, executives said, giving the chain more reason to look forward to shrinking COVID-19 case counts.

Fewer COVID-19 admissions and a potential return to typical seasonal volume trends would likely herald a return of low-acuity patients who had postponed care, Sutaria said.

Here, however, leaders of the two for-profit systems somewhat differed.

Rutherford said the return of lower-acuity patients would “not be a bad thing” for HCA so long as they don’t interfere with the continued growth of its higher-acuity services. Of note, the chain has recently reported facing capacity constraints in certain markets due to a workforce shortage.

Citing pricey contract labor issues that will likely persist into 2023, Sutaria stressed that the low-acuity work Tenet is hoping to leave behind wouldn’t be accretive to the business “and also is probably not the best use of our hospital capacity, looking forward,” he said.

Tenet and HCA each said labor issues have been slow to stabilize. Sutaria noted that Tenet “hasn’t seen that much change in the rates” demanded by contract workers since the summer but that the company has been “more careful” lately about the new agreements it’s signing.

Third-quarter earnings reported in October disappointed investors as Tenet and HCA alike logged lower year-over-year revenues.

Both organizations were hesitant to share concrete predictions for the final quarter or 2023, with executives again saying they want more time to nail down patient volumes, labor trends and broader economic factors such as inflation.